Oil firms sweat ageing North Sea assets to stave off shutdowns

LONDON, April 25 (Reuters) - Smaller oil producers are
teaming up with engineering and oil services companies in
Britain's North Sea to squeeze extra drops from ageing
facilities before rising costs force them to close.

Improving "wrench time" - hours spent at worksites rather
than on assessments and form-filling - and bringing in
specialist teams to boost recovery rates, will help prevent
early decommissioning, industry participants say.

Oil services companies are competing to take on "late life"
asset work, providing the expertise that smaller producers lack.

"There's more of a reliance on our engineering and
construction project management knowledge to fill the void that
may be there," said Alan Johnstone, managing director,
brownfield and asset management at oil services company AMEC.

The prize is substantial, with as much as $335 billion worth
of oil and gas output still up for grabs in Britain's North Sea.
By overhauling veteran platforms that are operating beyond their
design life, producers can hold off decommissioning for another
few years.

"This approach is gaining traction again because over the
last few years we have seen assets changing hands," said Walter
Thain, senior vice president for Europe at oil services company
Petrofac.

EnQuest, Talisman Sinopec , Ithaca
Energy and Fairfield Energy are all extending the life
of their North Sea assets by bringing on new crude streams with
tie-backs to existing platforms, or by adding pumps to wring the
last oil from a depleted reservoir.

Talisman Sinopec is in the midst of a major project to
extend the life of the six oilfields at the Montrose/Arbroath
complex - one of the oldest in the UK.

New fields Shaw and Cayley will come onstream via subsea
pipelines, requiring modifications throughout the existing
platform and the installation of a new bridge-linked platform.

But major platform refurbishments are only part of the
challenge. The industry also has to address a rapid fall in
production efficiency, down from 80 percent a decade ago to an
average of 60 percent in 2012. And that means making changes to
day-to-day operations.

"Some of the assets in the North Sea could be 50-75 percent
better in terms of production efficiency - it's about
streamlining processes and better planning," said Neil Bruce,
president, resources, environment and water at SNC-Lavalin
. "It's not unheard of for operators to get five to six
hours of productive work in, over a 12-hour day."

The industry has wrestled with this challenge for years, but
is under more pressure to address it following the publication
of the Wood Review in February. This stressed
the need to maximise recovery from the basin, and argued that
boosting production efficiency would help achieve this.

RISING COSTS

Part of the problem is that rising costs have encouraged oil
majors to focus on more competitive projects elsewhere. The
average operating cost in the UK North Sea is now 17 pounds
($28.56) per barrel, up from 13.50 in 2012, trade body Oil & Gas
UK said.

Not surprisingly, older facilities producing less oil fall
down the priority list or get sold off. Royal Dutch Shell
recently put three of its North Sea interests up for
sale and more could follow.

"As we go forward we have to look at asset integrity," Simon
Henry, Shell's chief financial officer, said at the annual
earnings presentation. "Which assets justify ongoing investment
and which would others be more prepared to put the resource and
the new investment in to sustain the life?"

Smaller producers are more willing to invest because the
production volumes are more material to them, but running an
elderly platform or field poses challenges.

"Operating a mature field is a different animal - you need
to optimise small incremental changes, and move from reactive
maintenance work to preventative maintenance work," said Juan
Carlos Gay, a partner at consultants Bain & Company.

This is an area where oil services companies believe they
can make a big difference. Outsourcing the day-to-day operation
of a mature asset to one firm avoids a situation where engineers
are turned into managing engineers as they try to co-ordinate
the work of different contractors.

It also means the operator's attention is not split across
several assets. "Oilfield services companies like Petrofac have
a dedicated delivery team which is just focused on that
facility," said Thain.

But how to resolve that problem of wrench time, so that
engineers spend more time on the manual tasks? AMEC's Johnstone
said it is all about advance planning. After all, platforms are
miles offshore and can't be resupplied with materials at short
notice - especially in bad weather.

"You need to look at the supply chain and make sure that the
person who is doing the job has the right tools and materials,"
he said. "And if they haven't got something they need, is there
any fallback work they can do? When you're offshore you can't
just pop out to B&Q (a UK home improvements retail chain) for a
nut or a bolt."